Sunday, August 14

Regulatory fears put a brake on Ethereum traders’ $ 5,000 target

This week, the price of Ether (ETH) was within 2% of its all-time high, and on December 2, the altcoin reached its highest price in terms of Bitcoin (BTC) since May 2018. Ether, which reaches 0.0835 in its BTC pair, it represents 229%. profit for 2021, but the Ether bulls could come out empty-handed from the expiration of the $ 680 million options this Friday.

ETH / BTC price on FTX. Source: TradingView

Notice the upstream channel formation started in mid-October, likely reflecting the total $ 177 billion value of the network. locked in smart contracts (TVL). Also, Ether’s ETH 2.0 beacon chain the balance reached a maximum of 8.45 million, representing an increase of 4.5% in November.

Last week, four Ethereum blockchain-based metaverse projects generated more than $ 100 million in virtual lands in non-fungible token (NFT) sales last week, according to a report from Cointelegraph.

However, Ether investors might be concerned about the US Lower House meeting scheduled for December 8, where the committee will focus on “Digital Assets and the Future of Finance.” Stable coin issuers and CEOs of exchanges have been invited, so there is some potential tension coming from the threat of new regulation.

Regardless of the reason behind ETH’s current 6% ETH price drop, the bulls missed an opportunity to secure an $ 80 profit on the December 3 weekly option expiration.

Ether options add open interest for December 3. Source:

A broader view using the call-put relationship shows a 19% advantage for bears, as $ 375 million put instruments have a higher open interest versus $ 305 million call options. . The 0.81 indicator is misleading because the 49% bull run since September caused most of the bearish bets to be rendered useless.

For example, if the price of Ether sustains above $ 4,400 at 8:00 am UTC on December 3, only $ 68 million of those put options will be available. Therefore, there is no value in the right to sell Ether at $ 4400 if it trades above that price.

Bulls Unfazed After Today’s 4% Price Drop

Below are the three most likely scenarios based on the current price action. The number of option contracts available on December 3 for bullish (call) and bearish (put) instruments varies depending on the expiration price of ETH. The imbalance that favors each side constitutes the theoretical benefit:

  • Between $ 4,300 and $ 4,500: 11,300 calls vs. 15,400 put options. The net result is balanced.
  • Between $ 4,500 and $ 4,700: 21,700 calls versus 7,300 put options. The net result is $ 65 million in favor of call (bull) instruments.
  • Above $ 4,700: 26,000 calls versus 5,000 shipments. The net result is $ 100 million in favor of call (bull) instruments.

This gross estimate considers call options that are used in bullish bets and put options exclusively in neutral to bearish operations. Still, this oversimplification ignores more complex investment strategies.

For example, a trader could have sold a call option, effectively gaining negative exposure to Ether above a specific price. But, unfortunately, there is no easy way to estimate this effect.

Bulls need $ 4,700 to secure a decent profit

The Ether Bulls need a 4.7% move from $ 4,500 to $ 4,700 to make a profit of $ 100 million. On the other hand, bears simply need to keep the Ether price below $ 4,500 to avoid losses.

As the ETH / BTC chart indicates, there is some decoupling gaining ground, which could favor Ether holders. Despite the incentives to push the Ether price above $ 4,700 ahead of Friday’s expiration, this favorable outcome for the bulls seems somewhat far off.

Could the bears save the expiration of this week’s options and avoid a loss of $ 100 million? Possibly.

The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and commercial movement involves a risk. You should do your own research when making a decision.